Tax attorney in Los Angeles - Victory Tax Lawyers
(800) 883-8301 Free Consultation

Offer in Compromise for Businesses and Self-Employed Individuals

Offer In Compromise

What is an Offer in Compromise (OIC)?

An Offer in Compromise is a powerful program offered by the IRS that allows businesses and self-employed individuals to settle their tax debt for less than the full amount owed, under certain circumstances. It provides a fresh start for taxpayers struggling with overwhelming tax obligations.

Eligibility Criteria:

  • Demonstrated inability to pay the full tax debt.
  • Compliance with all tax filings and estimated tax payments.
  • No open bankruptcy proceedings.
  • Valid offer based on accurate financial information.

Key Steps in the OIC Process:

  • Determine Your Eligibility: Assess your financial situation and ensure you meet the IRS’s criteria for an OIC. Seek professional guidance if needed.
  • Prepare a Comprehensive Offer: Calculate your reasonable collection potential (RCP), which is the maximum amount the IRS expects you to pay. Your offer should be based on your RCP and your ability to pay.
  • Gather Required Documentation: Compile all necessary financial documents, including income, expenses, assets, and liabilities, to support your offer.
  • Complete IRS Forms: Fill out the required IRS forms, specifically Form 656 (Offer in Compromise) and Form 433-A (OIC) or Form 433-B (OIC), depending on whether you’re an individual or a business.
  • Submit the Offer: Pay a non-refundable application fee (unless you qualify for a waiver) and submit your offer, along with all supporting documents, to the IRS.
  • Await IRS Review: The IRS will review your offer and may request additional information or clarification.
  • Negotiate with the IRS: Be prepared to negotiate with the IRS to reach an agreement on the settlement amount. This process may involve some back-and-forth communication.
  • Wait for a Decision: The IRS will decide whether to accept, reject, or counter your offer. This can take several months.
  • Comply with Terms: If your offer is accepted, you must adhere to all terms and conditions, including making the agreed-upon payments.
  • Achieve Debt Freedom: Successfully completing the OIC program will result in the reduction or elimination of your tax debt, allowing you to achieve financial stability.

Navigating the Offer in Compromise program for businesses and self-employed individuals can be complex. It’s often wise to consult with tax professionals or attorneys who specialize in tax resolution to increase your chances of a successful outcome and debt relief.

Frequently Asked Questions

What is an Offer in Compromise (OIC) for businesses and self-employed individuals?

An Offer in Compromise is a program offered by the IRS that allows businesses and self-employed individuals to settle their tax debt for less than the full amount owed. It’s a way to help taxpayers who cannot afford to pay their entire tax liability.

Who is eligible for an OIC as a business or self-employed individual?
To be eligible for an OIC, you must meet specific criteria, including demonstrating that paying your tax debt in full would create a financial hardship. The IRS evaluates factors like your income, expenses, assets, and future earning potential.
What types of tax debt can be included in an OIC?
An OIC can include most types of federal tax debt, including income tax, self-employment tax, and certain penalties and interest.
How is the OIC amount determined for businesses and self-employed individuals?
The IRS calculates the OIC amount based on your ability to pay. This involves a comprehensive review of your financial situation, including your income, expenses, assets, and future earning potential. The final offer amount is often a compromise between what you owe and what you can reasonably pay.
Are there fees associated with applying for an OIC?
Yes, there is a non-refundable application fee for submitting an OIC. However, this fee may be waived if you meet certain low-income criteria.
What happens if my OIC is accepted?
If your OIC is accepted, you will need to comply with the terms of the agreement, which typically includes making the agreed-upon payments and staying current on your tax obligations for a specified period (usually five years).
How long does it take to process an OIC application?
The processing time for an OIC application can vary, but it often takes several months for the IRS to review and make a decision. It’s essential to be patient during this process.
Can I negotiate with the IRS regarding the OIC amount?
Yes, you can negotiate with the IRS during the OIC process. It’s often beneficial to work with a tax professional who can help you present a strong case and negotiate effectively on your behalf.
Is it advisable to seek professional help when applying for an OIC?
Yes, many businesses and self-employed individuals find it beneficial to work with tax professionals, such as tax attorneys or enrolled agents, when applying for an OIC. These professionals can provide guidance, ensure your application is complete, and negotiate with the IRS on your behalf to increase your chances of success.

Remember that OIC applications can be complex, and the IRS has specific criteria for approval. Seeking professional guidance is often a wise decision to navigate the process successfully.

Request A Free Consultation

Request a free consultation with our experts today and take the first step towards achieving your goals.

Tax attorney near me free consultation